And that leaves what as incentive to enter the healtcare industry, invent things like Intuitive's DaVinci, develop new drugs, etc?

Where are you going to get good doctor's, researchers, nurses, etc. if you don't pay them well?

The vast majority of medical innovations exist because there's a profit incentive to create new and better ways to do things. Govenment may do some things well; innovate isn't one of them. No profit and government run healthcare = far fewer advancements in medical science.

I take exception to the concept that "The vast majority of medical innovations exist because there is a profit incentive to create".

I have read this idea many times by many different posters and I say it is not true. I say the creative mind does not need profit. I say the creative mind cannot help itself but to create, and all it needs is time away from survival. Perhaps there are some that create with profit as their motivation, but I believe they are the minority. Even the example given, ISRG, had its birth in a non-profit. From ISRG's website we get;

The original prototype for Intuitive Surgical’s da Vinci System was developed in the late 1980s at SRI International under contract to the U.S. Army. While initial work was funded in the interest of developing a system for performing battlefield surgery remotely...

and commerial interest came afterward

....possible commercial applications were even more compelling: It was clear to those involved that this technology could accelerate the application of a minimally invasive surgical approach to a broader range of procedures.

Even SRI International where the original work was done is a "nonprofit" 501c corporation.

I say medical innovation happens because there are people who do not chase the "profit". People who are motivated for the betterment of mankind, or the thrill of leaving a mark, or the desire to add to humanity, combined with intelligence, creativity and inspiration.

I say the people who create, will create, whether they are paid for their research by Government or Amgen.

Will those same people pursue "profit" when the creating is done? Sometimes. Sometimes they will move on to the next creation.

There are people who fund the creators who seek profit (us). But the creative mind will go on, with or without our opportunity for profit. We need them, not the reverse.

I believe profit sometimes stands in the way of the creative mind. Profit punishes it for proving something doesn't work, unable to reward such a contribution to knowledge. Profit restricts the creative mind from its most wild ideas, because it cannot afford to have them not work, just as any for profit business cannot afford a failure.

I agree with the thought that you can't stop a creative mind and generally profit doesn't drive the process.

However, I think the general argument is "Does making money drive the funding and/or employment of people that create things". That answer is definitely a yes.

R&D is done by every organization from the US Government, to college & universities, non-profits and businesses. It has been a driving force for longer than I have been alive and that's a long time. IBM, Microsoft, Intel, the US Government, Harvard, Yale, etc. each own 10s of thousands of patents and they make lots of money from them. Yes, the government is making a money licensing the patents created with our tax dollars.

Non-profits can a make lots of money so long as they don't make a 'Profit". There are lots of ways to skin that cat. SRI International is a great example. The salaries and benefits are a lot better than most companies. Additional, SRI is very interested in make a profit from its patents. Its home page has a section named "Spin-off Ventures." Quoting "SRI partners with leading investors to bring our breakthrough technologies to market through spin-off companies."

Do I think that creating a National Health Care System will slow the creative process of funding of that process - absolutely not. Change is one of the few things gureentied in life. If you don't change other companies, governments, universities etc. will and you will be left behind.

Except that many things are very expensive to develop, such as the Da Vinci system and pretty much every drug. If not for ultimate profit, these things aren't being developed. You are right there are some who are motivated otherwise, but your examples are the exceptions not the rule.

Creativity does not come from profit. Profit is the result of creativity. Creativity thrives when property rights are respected. It withers when they do not. The historical record is clear.

If a person mixes their mind and labor to produce something that other people value, it is that person's choice as to what price to charge. $0 is a price. What is important is that the creator of the product makes that decision. Phillip Zimmerman is my favorite example of a person that gave away the product of his creativity for $0, although I am sure he kept his day job. He had to eat, after all.

Unfortunately, the government can not give away anything that it produces for $0. It doesn't own anything. Only by infringing on the property rights of individuals, or outright theft, can the government acquire any resources at all.

When the government tells you that it is giving you free health care, it means that it is taking resources away from private individuals and giving them to you for $0 (and political capital, which is extremely valuable.) That's not quite the same thing as Phillip Zimmerman's story.

(Zimmerman now charges a fee for PGP service after roughly 15 years of charging $0. Again, his choice.)

The idea that government can produce things for free is not "change" or new in any way. It is a very old concept that dates back as far as human history has recorded. The idea that individuals own the fruits of their labor, free from any interference by the State, is a new idea. It is still in its infancy.

To prove that individual property rights are the framework from which greater creativity is found, one only needs to peruse the historical record. It is unmistakenly clear that the darkest times in human history have occured when State power over individuals was the greatest and vice versa.

Many have tried to orchestrate fancy excuses to explain away the lack of creativity in various parts of the world - areas where individual property rights have never been embraced. Maybe one day they will discover a way that Collectivism can work. But they haven't yet and until they do, I ask them to prove it, and will opt for what I know works: you own your life (your future), your labor (your present), and your property (your past labor). Profit is the result of this system. It is a blessing, not a curse.

While it is a blessing, it really is more unique than the norm throughout history. The US is still an infant nation and an infant system. Prior, you had the rule of power, and hence ownership derived from the exercise of that power. Kings told you what to do. Dictators told you what to do. Monarchs took from you what they willed. Challenge any and you died, quickly or horribly. So to talk about "darkest times in human history" really is to talk about the bulk of human history. So which to cheer, the person developing something to make money or the person developing something out of self preservation?

Maybe one day they will discover a way that Collectivism can work. But they haven't yet and until they do, I ask them to prove it, and will opt for what I know works: you own your life (your future), your labor (your present), and your property (your past labor). Profit is the result of this system. It is a blessing, not a curse.

The US is the only advanced country which does not have universal health care. Contrary to what some people claim, it is not really the best health care in the US, but it is the most expensive.

Agreed on all points. In the Hobbesian view, government provided the framework for property rights, thus it is a blessing, as he stated in his famous "nasty, brutish and short" essay. That is the typical minimalist approach. My question for Hobbes would have been, "do you read history or just make it up?" He seemed to have forgotten that central government had been ruining people's lives for thousands of years prior. It is apparent to me that Hobbes was mistaken. It is only when governments released their grip and contract law ruled rather than rulers, that a framework for private property arose.

Scientists will always work to understand diseases, and develop treatments just because we want to do it. I work in public health research, and I as well most people I know in the field will get no monetary benefit for working hard on research. We get enough to pay us about minimum wage (when you take into account the work week, etc).

Most drug companies do not invent the treatments themselves. They take the basic science research from that which was paid for by the public. All signalling pathways, and underlying understanding of disease typically comes from publicly funded (NIH) research. Many drugs and treatments also begin as NIH funded research at universities. When something begins to work -> then the drug companies buy a patent for it, or form a paying collaboration with a specific university or researcher to get their hands on the drug. If it is a small company developing the drug, a large company such as Roche buys the small company just for the patent.

Drug companies are not the source of development and research, nor is the capitalistic process aiding in bringing appropriate medical treatments and the best science to the medical field. Drug companies are very similar to middlemen, in the current system.

Recently the NIH is getting into funding the large scale medical trials for drugs (which are prohibitively expensive) - and the NIH itself is starting to get into the development process from beginning to end. This is the start of a major transition - moving away from private patents on drugs to government developed medicine from the beginning to the end.

I take exception to the concept that "The vast majority of medical innovations exist because there is a profit incentive to create".

The innovation may very well be made through university, gov't funded or non-profit research, but the development and production to bring the innovations to market at commercial scale require capital. Without a profit motive, what brings capital to the process?

The biggest source of money right to support the development of treatments is the NIH (which is from taxpayer money).

The development of an understanding of human biology and treatments is becoming more and more - a publicly owned system. All taxpayer funded research now has to be open for the public to read through www.pubmed.com. NIH is moving into funding of the large drug trials. Next, the government will be moving into funding large scale production. When the US government is now testing, producing, and selling drugs we'll have entered into the next chapter of medicine. I don't think it is coincidental that the US is simultaneously moving in the direction of providing the medical insurance. Health care is being taken from for-profit companies into the public commons on all fronts. It won't happen in one year, or in ten years - but I believe that one-hundred years from now, for-profit companies in human health will be an artifact of time.

Yes, Governmental investment plays a large part in developmental stages for many things. The military and space program led and leads to a plethora of consumer applications.

But people get paid for this still. Companies charge the US Government. Perhaps there are some who do it for the love of the work only, pay itself is unimportant, but I suspect most aren't like that.

I'm not so sure I like your vision there, tho Rof, from both a political and economic point of view. Government is always inefficient economically by its nature. So getting them to run the "show" will probably lead to greater costs. From a political point of view, well I will leave that to another thread.

a) Creativity does not require monetary stimulus. You will always get plenty of inventions no matter whether your inventors live in Silicon Valley or in a Gulag camp.

b) But the UTILIZATION of these inventions by the industry is always problematic without a monetary stimulus. Not that it can't be done in principle. On the contrary, I fully believe it CAN be done, but that would require a very enlightened government. When you have such a government, it doesn't matter what kind of economic system you have. If, however, your government is full of moronic crooks and crooked morons (which is the case for most governments), then it appears that things won't get moving without some private initiative. A monetary incentive is then just a way to move forward economically even with a horrible government in place.

c) But not every kind of monetary incentive will do the job. As long as you have some kind of economic activity that offers you a 20% return, you will have essentially no people attempting to utilize inventions for a 10% return. Got an oil well? You are lost for productive life for ever. Until it dries out completely, no force in the universe will convince you to try some productive enhancement. That's what's called the "resource curse", and this is the reason the Confederacy lost to the North and the reason why Russia, Nigeria, Saudi Arabia, Venezuela and others will never be inventing anything high-tech until the day they run out of oil. So the monetary incentive will only work when all other, more profitable venues have been closed. Otherwise all the incentives and thereby all sacrifices by consumers will be wasted.

(However, I think the general argument is "Does making money drive the funding and/or employment of people that create things". That answer is definitely a yes)

until I investigated the Davinci ISRG history. From the ISRG website; It seems not to be "money making", but National defense, the NIH and other government bureaucracies, actually drive the research;

The original prototype for Intuitive Surgical’s da Vinci System was developed in the late 1980s at SRI International under contract to the U.S. Army. While initial work was funded in the interest of developing a system for performing battlefield surgery remotely....

Showing the original research was done at the expense of the US taxpayer. The commercial aspect came second. And as of now the original research has not succeeded in remote control battlefield surgery.

.... possible commercial applications were even more compelling: It was clear to those involved that this technology could accelerate the application of a minimally invasive surgical approach to a broader range of procedures.

Rof,

Your reply matches the results I found in the FAQ's from SRI International's website. They have a chart of revenue percentage by client, showing only 10% of their revenues from any source outside the US Taxpayer. 90% of what they accomplish is taxpayer funded.

rd80,

The innovation may very well be made through university, gov't funded or non-profit research, but the development and production to bring the innovations to market at commercial scale require capital. Without a profit motive, what brings capital to the process?

Distribution is a seperate question from existence, and in that aspect you are describing "capitalism" as it currently exists.

But this statement does not hold up; "The vast majority of medical innovations exist because there is a profit incentive to create".

In fact it seems more likely "The vast majority of medical innovations exist because there was a government bureaucrat who chose what to fund wisely'.

The vast majority of medical innovations exist because there was a government bureaucrat who chose what to fund wisely.

This statement makes absolutely no sense. If all it ever took was a wise government bureaucrat to spend our money, there would be no need for a private market and Communism would be the superior economic model. Again, the Economic Caclulation Problem of the Socialist Commonwealth shows that this is impossible.

I'm not sure if you're familiar with the bureaucratic method. If a department does not spend its entire budget, its budget gets cut. If the budget gets cut, then the department loses power. Bureaucracies must always meet or exceed spending expectations in order to exist. Therefore, they must always grow larger and consume more resources, until the people supporting the bureaucracy, i.e. the taxayer, can no longer afford the largesse.

The government bureaucrat who chooses to fund wisely is the blind dog that occasionally finds the bone. If I had billions of dollars of taxpayer money at my disposal, I'd also occasionally stumble upon a good project to put your money into. It would be great for me as well in that devoish and other progressives here will ignore the billions of dollars I wasted on failed projects and graft.

Devo - Interesting discussion. I stand corrected on most medical innovations existing because of a profit motive. I didn't research the example I chose and you clearly showed it's origins were funded by the government.

I stand by the statement that those innovations would not make it from R&D into production and commercial use without a profit motive.

It would be very interesting to know the mix of gov't vs. privately funded R&D and the track record of each at moving discoveries to commercialized products.

I compare this to the writing of Edgar Allen Poe. The man was a prolific writer, and most of his stuff was pretty average. But, every once in a while, a "Pit and Pendulum" comes out. That's government R&D. They fund tons, and I mean tons, of stuff. Most of it is of marginal economic utility, but every once in a while, something good comes out of it. Even the marginal stuff could have future uses in the economic realm, but it is mostly just knowlege. These people seek knowledge.

Government grants in this sphere succeeds because of the independence of the grant process. You can argue they fail because of the low sucess rate, but taken in total, I'd say it has paid for itself many times over. If you don't believe it, try growing your own food. Our food supply is what it is because of the USDA and similar organizations. Sitting on a grant panel as a scientist is considered an honor and a duty to select the best recipients based on merit.

It is also this failure rate that makes the first steps, those so far away from the economic side, more likely to be done by government funds. The problem is that these innovators are quite often (not always) terrible at the next step. They are idea people, but have no clue how to develop the idea. This is where private capital and government funds diverge. Private capital funds the practical testing of the product beyond the theory. The failure rate is still high, and the risk is still great for the private money. But, the odds are much better once the field is shrunk down.

The vast majority of medical innovations exist because there was a government bureaucrat who chose what to fund wisely.

This statement makes absolutely no sense.

David,

I knew this would be hard for you. Read the funding evidence, consider the statement, repeat as neccessary.

Rd80,

Devo - Interesting discussion. I stand corrected on most medical innovations existing because of a profit motive. I didn't research the example I chose and you clearly showed it's origins were funded by the government.

Thanks, with all due respect for being able to see the evidence.

I stand by the statement that those innovations would not make it from R&D into production and commercial use without a profit motive.

I don't know. I believe it is how we do it in the USA, I have not investigated the idea.

It would be very interesting to know the mix of gov't vs. privately funded R&D and the track record of each at moving discoveries to commercialized products.

Yes. I haven't looked.

wrparks.

It is also this failure rate that makes the first steps, those so far away from the economic side, more likely to be done by government funds. The problem is that these innovators are quite often (not always) terrible at the next step. They are idea people, but have no clue how to develop the idea. This is where private capital and government funds diverge. Private capital funds the practical testing of the product beyond the theory. The failure rate is still high, and the risk is still great for the private money. But, the odds are much better once the field is shrunk down.

I basically agree, although I believe there are probably very many exceptions that can move from creating to developing easily. Marketing models to follow exist.

I absolutely do not assume that "private capital funds the practical testing" theory unless I see proof of a substantial difference.

The government then produces 9 medical innovations and the private sector produces 1.

Why then! We could say that 90% of medical innovations come from taxpayer funding. Wow! Isn't government wonderful? We didn't even have to consider the legality or morality of stealing from private individuals to fund our pet projects. Just look at the results, you'd exclaim!

Now re-read what I wrote about the bureaucratic method:

If I had billions of dollars of taxpayer money at my disposal, I'd also occasionally stumble upon a good project to put your money into. It would be great for me as well in that devoish and other progressives here will ignore the billions of dollars I wasted on failed projects and graft.

So that's the first part. That doesn't even consider the quality of the innovations themseves, nor the long standing University-Medical-Government complex that rewards away any success and ignores any failure in research, since all spending is good. It keeps them employed.

"The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." – Henry Hazlitt in Economics in One Lesson

What really cracks me up about this, however, is that you have completely discredited your own propaganda in this post. Now, THAT is funny. For the past year, you have been on CAPS berating this so-called private health care system in America and how wonderful it would be if the government just took over. Yet, you write here that the government is so involved in health care that 90% of innovations come from federal funding.

Well, maybe that's the problem! Maybe the reason health care is so expensive is because the governments spends so much of our money to fund it. You ever think about that? Of course not. It's all evil Capitalists, I know,

Logic is not your strong suit. I take comfort in the fact that the majority of Americans are waking up to this sort of nonsense.

All I want from now on is for your to admit that there is no private health care system in America. That's all. Therefore, there is no bogeyman Capitalist for you to direct your anger at. Your anger should be directed squarely at the people you worship in the government - all those wise bureaucrats.

"I absolutely do not assume that "private capital funds the practical testing" theory unless I see proof of a substantial difference."

Unfortunately, my evidence comes from seeing it. The work is quite often still done at universities, by faculty and graduate students. But, funding for graduate students for what I'll call 2nd stage testing (going from proof of concept to practical applications, but not yet 3rd stage proving and regulatory approval) is funded quite often by a mixture of industry and grants. You would be amazed at the relationship between universities, industry, and government funding. It's often difficult to see where the funding starts and stops.

From a USDA perspective, this is a good link that both supports and does not support my claims. At the very least, it shows the successes of the USDA and similar research oriented groups.

Instead, lets observe that at SRI International, the Government fund 90% of research, not 99%. Let's remember that rd80's randomly selected example could be an outlier, in either direction or fairly representative. Right now it is the actual evidence we have.

Now, you choose imaginary results for your imaginary funding:

The government then produces 9 medical innovations and the private sector produces 1.

And reach an imaginary, example conclusion, and present your imagination of what I might exclaim.

Why then! We could say that 90% of medical innovations come from taxpayer funding. Wow! Isn't government wonderful? We didn't even have to consider the legality or morality of stealing from private individuals to fund our pet projects. Just look at the results, you'd exclaim!

Of couerse, I did not actually exclaim that.

I said "I take exception to the concept that "The vast majority of medical innovations exist because there is a profit incentive to create".

And then I supported it with evidence from the example offered, not even one of my choosing. I also explained a little bit about my understanding of human nature and why that belief led me to question and investigate the statement rd80, and quite a few others have made.

The suggestion that the results of that government research money should be considered is debatable, because failure in research is neccessary and very expensive and possibly impossible for "private enterprise" to do because of the high risk and that taxes spread the highest risk step enough to make research that proves what doesn't work possible.

The suggestion that "private invetsment" funds the "stage two" development is possible but remains unproven (sorry wrparks, I have not had time to read your link)

I have to run now, but I believe you have taken Mr Hazlitt's lesson and done it one worse. He is correct to try to look at the effects of economic policy on all groups, as difficult as that is.

You aren't even discussing real information. You make examples up to fit your religion.

In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Milton Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit

While medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.

In 1970 the government forecast that the hospital insurance (HI) portion of Medicare would be "only" $2.9 billion annually. Since the actual expenditures were $5.3 billion, this was a 79 percent underestimate of cost. In 1980 the government forecast $5.5 billion in HI expenditures; actual expenditures were more than four times that amount — $25.6 billion. This bureaucratic cost explosion led the government to enact 23 new taxes in the first 30 years of Medicare. (See Ron Hamoway, "The Genesis and Development of Medicare," in Roger Feldman, ed., American Health Care, Independent Institute, 2000, pp. 15-86)

All countries that have adopted socialized healthcare have suffered from the disease of price-control-induced shortages. If a Canadian, for instance, suffers third-degree burns in an automobile crash and is in need of reconstructive plastic surgery, the average waiting time for treatment is more than 19 weeks, or nearly five months. The waiting time for orthopaedic surgery is also almost five months; for neurosurgery it's three full months; and it is even more than a month for heart surgery (see The Fraser Institute publication, Waiting Your Turn: Hospital Waiting Lists in Canada).

These are numbers you can chew on. Call it whatever you like. A religion, a cult, propaganda. I don't care. You have put forward the private health care system as the culprit and government as the savior. The real numbers prove you wrong. Government is involved every step of the way and dominates the health care industry.

There is no boogeyman here. Your criticisms of the private medical industry are about as useful as criticizing Santa Claus.

Nice of you to change the subject. On your new topic you post this paragraph;

While medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.

1965 - 1989 are pretty carefully selected endpoints. Inflation in 65 was low, in the 70's it went screaming high and still exceeded 4% in 1989 before dropping below after 1991. To only double in cost from 1965 - 1989 is extremly cost effective by comparison. Your Gov't appreciates your acknowledgement and thanks, for its ability to control costs in an inflationary environment.

Selling your religion depends upon your believers ignorance, and not thinking through your selective history, or not placing it in the context of its time period.

I have read alot of your selected reading suggestions. I find them to be nothing more than a marketing campaign designed to remove authority from the vote of a democratic nation and bestow it upon corporate executives. The paragraph above is typical of the carefully selected endpoints, and selective history that runs throughout all of Mises work.

However. since I have read many of yours, you read one of mine. Robert A Heinlein, a hero to some libertarians once wrote a short story calle "Coventry". It describes a hero who rebels against the extreme socialist gov't you tell people I want, and once offered the chance, leaves it for the freedom of Coventry.

Enjoy it. I haven't read it in 25 years so don't expect an in depth discussion. Just look for what I consider to be the inevitable result of "small gov".

Fleabagger,

I cannot take seriously an article that spends it first three paragraphs whining about other peoples opinions. I read it anyway. He makes the unsubstantiated claim that "businessman can forecast the future better than economists". Some can, some cannot. Be reminded that your Mises writers are not businessmen. They pretend to be economists, as the denigrate the profession, except for themselves of course. The typical marketing style of any cult.

wrparks,

Thanks for your link. It absolutely lends support to your argument that "private capital funds the practical testing" in a large example of instances.

About David's comment, increasing by 224% is more than tripling, not doubling.

More importantly, I have read alot of your selected reading suggestions. I find them to be nothing more than a marketing campaign designed to remove authority from the vote of a democratic nation and bestow it upon corporate executives.

Seriously. That is what your advocated policies amount to.

Think about this: do you have any evidence that regulatory capture is avoidable in any society other than a totalitarian one lacking any vestige of a private sector? It seems that, in practice, it is as inevitable as the rotation of the earth. People do what they have incentive to do, not whatever their fellow man most hopes they would do.

You can't will away regulatory capture, or legislate it away. The only two ways you can stop the private sector from corrupting the government are to have no private sector, or have no government.

Do you not understand what this statement means: "after inflation is taken into account?"

Feel free to criticize the Mises Institute for the work of Milton Friedman, Ron Hamoway, and the Fraser Institute.

You have no counter to my main point. The government dominates the healthcare industry, from start to finish, and has for over 50 years. You have been bashing a private health care system that does not exist. There is no way around this. I know it's going to be tough for you to admit you are wrong, but that's the way these things go sometimes.

Well, we get information is such strange places. I just found a libertarian writer I have little familiarity with. I can't wait to dive in. Rothbard referenced Coventry once in Law, Property Rights, and Air Pullotion. I'm going to have to read this.

Don't get too excited about Heinlein as a Libertarian hero. He had something for everyone, if memory serves.

I have a counter to your main point. It is completely wrong. Insurers dominate healthcare today. During the time period you want to blame a healthcare cost explosion, that was not very far removed from inflation (thanks Flea), on gov't, you choose to ignore the roles of inflation, unions in increasing accesibility, the baby boom, and increasing life expectancy.

Today after the fall of unions to Reagans "small gov't" salesmanship, accessibility sucks even for the insured, and quality is in decline.

Flea,

Your "regulatory capture" idea exactly explains what has happened to healthcare today. It takes a special kind of stupidity to advocate for the poacher though. I choose to support a better gamekeeper, HR 676. There are many models of public systems that outperform us at half the price or less. There is no model privatized system that does.